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China’s lockdowns hit non-essentials
Consumer sentimentLuxury purchase behaviourGreater China
Purchases of non-essentials are likely to be hit as China’s government continues to pursue a zero-COVID strategy and consumers make preparations for possible lockdowns.
The extended lockdown in Shanghai has spooked consumers around the country, who worry that what has happened to Shanghai residents could also happen to them. Indeed, some 57 of China’s top 100 cities by GDP had lockdowns or movement restrictions in place on April 22, according to Gavekal Dragonomics (as detailed in Business of Fashion).
Reports of panic buying in Beijing when an outbreak there led to mass testing are a sign of how consumers may react if they fear a lockdown is coming.
Why it matters
During the 2020 lockdowns when the coronavirus was first identified, people were worried about their health. This time around, with vaccinations and a less lethal strain, people are more worried about economic suffering, as supply and logistics chains are disrupted; anecdotal evidence suggests many are preparing for a worst-case scenario.
A locked-down Shanghai has also seen delivery services for food and medicines stretched to breaking point, so it’s understandable that thoughts of shopping for fashion and luxury items aren’t at the forefront of people’s minds.
The question is whether, post-lockdown, consumers jump at the chance to spend on such non-essentials again – and that’s certainly what luxury brands are hoping – or whether their confidence has been hit and they start saving more.
Age will likely be one factor here. But politics is another as the zero-COVID strategy seems likely to be in place for the rest of this year at least – which is bound to have an effect on the optimism that has hitherto driven China’s economy.
“Looking at when Shanghai’s lockdown will end is not the right milestone, because this is not about the lockdown. It’s about consumer confidence” – Pablo Mauron, China managing director and partner at Digital Luxury Group (DLG).